On March 26th, a fully laden container vessel departing from the bustling port of Baltimore collided with the Francis Scott Key Bridge, a vital artery also known as the Baltimore Harbor Outer Bridge. Within moments of impact, the bridge, facilitating approximately 11.5 million vehicle crossings annually, succumbed to the forces and collapsed. Spanning a distance of 1.6 miles across the Patapsco River, this critical infrastructure served as a lifeline for transporting hazardous materials, barred from traversing both the Fort McHenry and the Baltimore Harbor Tunnels. In the following analysis, we explore the profound economic reverberations of this bridge collapse.
The port of Baltimore stands as a pivotal conduit for automobiles and heavy machinery, consistently ranking among the top 10 in container ship volume and handling a significant 27% share of all US coal exports. While the port's operations are expected to remain dormant for an extended period, we anticipate that other ports along the East Coast will rise to the occasion, absorbing redirected shipments. Vigilantly, we will continue to monitor port activity levels and assess the economic repercussions on the city.
The Maryland Transportation Authority (MDTA), an independent state agency entrusted with the construction, operation, and maintenance of revenue-generating transportation projects, including the Francis Scott Key Bridge, maintains a diverse network. Overseeing eight toll facilities, the authority ensures the smooth functioning of transportation arteries critical to the state's economy. Bonded by a first lien on net revenues of the projects, MDTA possesses the autonomy to set toll rates, demonstrating flexibility in adjusting them as circumstances demand. Boasting credit ratings of AA from Fitch Ratings and Aa2 from Moody’s Investors Service, alongside a robust cash position and healthy coverage levels exceeding requirements, MDTA remains resilient in the face of challenges. Despite the collapse of the Key Bridge, credit agencies like Standard and Poor’s have affirmed that immediate credit implications are not anticipated, while Moody’s has indicated a negative but contained impact.
Source: Maryland Transportation Authority
Integral to MDTA's multi-facility tolling system, the Key Bridge accounted for 7.4% of toll revenues in fiscal year 2023. However, with approximately 95% of revenue sourced from commercial or passenger vehicle tolls, MDTA's financial stability remains largely intact. Traffic diversions are expected to primarily funnel towards the Fort McHenry and Baltimore Harbor Tunnels, both owned and operated by MDTA, ensuring continued revenue streams to support operations. Furthermore, MDTA’s monopoly on harbor crossings in this sector of the city reinforces its financial resilience.
As of now, our research group harbors no apprehensions regarding the creditworthiness of the authority or the city. The bonds exhibit continued liquidity, with no discernible impact on widening credit spreads. Highlighting MDTA's substantial cash reserves and coverage levels, alongside its rate-setting autonomy, we remain optimistic about its financial health. In an investor disclosure, MDTA underscores its substantial unrestricted cash position of $400 million and additional funds of $431 million in its Capital Account earmarked for near-term reconstruction costs. While the Federal Government's involvement in funding reconstruction is anticipated, further details are pending as the situation unfolds.
Update as of April 10, 2024:
On April 9th, Moody's revised MDTA's outlook to negative due to uncertainty around the Francis Scott Key Bridge replacement project's costs. Moody's affirmed their Aa2 rating citing the essentiality of the road network, fundamental strength of the service area and "history of strong financial and operational management and performance.